Extra £1bn for renewals?
NETWORK Rail should spend up to an extra £1 billion during the next Control Period on additional renewals work to replace worn-out assets, according to the Office of Rail and Road (ORR).
The proposal forms part of the rail regulator’s views on how NR should spend more than £34bn allocated for Control Period 6 (2019-24).
ORR Chief Executive Joanna Whittington said: “ORR’s initial assessment of Network Rail’s fiveyear plans shows that the transition from a centrally run company to one structured round eight geographic routes has improved the quality of the plans, but we want to see £1bn more spent on renewing the railway to improve reliability and boost safety.”
The ORR believes this can be funded through changes including greater efficiency and other savings. Director of Railway Markets and Economics John Larkinson told RAIL: “This is really different. Whereas before we’d have provided numbers, this time we want to reinforce the customer relationships for Network Rail.”
Larkinson said that the overall £48bn agreed by Government last October (£34bn from a direct government grant for CP6, plus the remainder via track access charges and other sources) showed the Treasury saw a long-term future for rail.
“They accepted that renewals are needed,” he said. “One of our key findings is that Network Rail’s plans are better, and better justified.”
Nevertheless, the ORR believes an extra £1bn is needed on renewals.
“We are looking at earthworks and structures, and so on, but we are not telling them what to spend it on,” said Larkinson. Instead, the ORR believes those decisions should be made by NR’s Routes.
Devolution is a key message in the ORR’s plans, with the regulator stating that now is the time for NR to advance its devolution plans.
Larkinson said: “We are rewriting Network Rail’s licence, and that is a fundamental change - it opens new possibilities for accountability. If a Route does not deliver, then we could alter that Route’s account and they get sanctioned. When NR then looks at the bonuses, it would see the sanction and there would be clear accountability.”
ORR Deputy Director of Railway Markets Chris Hemsley added: “There always needs to be strong central control, but key decisions can be made by Routes and they need to be sustainable.”
Larkinson said there was quite a bit more to do: “We want Network Rail and operators to look at the forecasted performance, and we will get NR’s views on the £1bn on July 13. Network Rail has not yet accepted the plans.”
The ORR has directed the Anglia, South East and Wessex Routes to review their performance targets,
to ensure they are robust and consistent with other routes.
The regulator also wants to strengthen the monitoring and financial controls on the NR System Operator function, which manages the timetabling process. ORR said: “This is important so that we provide greater assurance given the significant increase in funding [from £145 million in CP5 to £272m in CP6], which is designed to provide a step change improvement in CP6.”
NR Chief Executive Mark Carne said: “We welcome the regulator’s general support for our plans for Britain’s railways, delivering a more reliable service that passengers can rely on.
“It has accepted the majority of our plans, strongly supporting the changes we have been making - including our focus on bringing track and train closer together, supporting devolution, the creation of the System Operator, and incorporating customer-focused scorecards into its monitoring during CP6.
“We will consider the detail carefully over the coming months, as there are still some areas of concern that we will need to work on with ORR before it publishes its final determination in October.”
Peter Loosley, Policy Director at the Railway Industry Association, said: “We are pleased to see the ORR commitment to increased renewals expenditure, and that they have included a commitment for Network Rail to review its spending profile to smooth rail investment over the five years of CP6.
“This is something the Railway Industry Association and its members have been calling for over many years, in particular since the downturn in renewals expenditure over the last 18 months of CP5. We therefore applaud this reaction from ORR.
“Aside from its damaging impact on rail suppliers, ‘boom and bust’ in the rail funding system results in a more expensive railway. So we urge Network Rail, the DfT, Treasury and the rail supply sector to work with us and the ORR to deliver a smoother pipeline of work in the years ahead, to the benefit of the sector, the passenger, and ultimately the taxpayer as well.”